Reuters: Hot Stocks: UPDATE 2-KGHM shares drop after Chilean mine delay and cost overrun

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UPDATE 2-KGHM shares drop after Chilean mine delay and cost overrun Mar 1st 2013, 13:23 Fri Mar 1, 2013 8:23am EST * Sees joint costs of Sierra Gorda up a third at $3.9 bln * Sierra Gorda launch may be delayed by 2-3 months * Q4 net 753 million zlotys, almost a tenth below forecasts * Shares down 5 pct (Adds management, analyst comments, market reaction) By Agnieszka Barteczko and Adrian Krajewski WARSAW, March 1 (Reuters) - KGHM, Europe's No.2 copper producer, warned its key Chilean mining project may be delayed and would cost a third more than previously expected, sending its shares down 5 percent. The Polish company's Sierra Gorda mine is one of the world's largest copper projects, with annual production seen reaching 40 percent of KGHM's planned 2013 copper output of 548,000 tonnes. "This is still a highly profitable project," KGHM Chief Executive Herbert Wirth told a news conference after the state-controlled miner raised its estimated overall cost to $3.9 billion. The launch of Sierra Gorda, which will also produce 11,000 tonnes of molybdenum a year or 10 percent of the metal's global supply, will still happen next year, but up to three months later than earlier planned due to delays in providing services by local contractors. The project, 55 percent controlled by KGHM, was part of its C$3 billion ($2.9 billion) purchase last year of Canada's Quadra FNX, now named KGHM International. KGHM splits costs with its Japanese partner Sumitomo. "The participation of our Japanese partner in financing is much higher than of KGHM International," the latter's deputy chief Jaroslaw Romanowski told a news conference. He added that KGHM International is able to finance the increased investment without the need of support from the parent company. KGHM shares were down 5 percent to 171.2 zlotys by 1150 GMT, with some analysts citing concerns that higher investment spending could result in a lower dividend payout from the company. "What I find most disappointing is the small amount of information on Sierra Gorda," Leszek Iwaszko, analyst at Societe Generale, said. "The share fall also reflects the uncertainty and confusion ... concerning (the company's) dividend." KGHM's CEO told TVN CNBC that expectations of a dividend of 20 zlotys per share - amounting to 82 percent of KGHM's net profit for 2012 - were too high. Full-year net profit at 4.86 billion zlotys came in above company guidance, but the fourth quarter was less profitable than the market had expected. Net profit for the period reached 753 million zlotys, down a fifth of the year-ago figure which included telecom asset spin-offs, and almost a tenth below analyst forecasts. The miner expects no improvements this year, expecting a mining tax implemented a year ago to curb net profit by a third to 3.2 billion zlotys. ($1 = 3.1746 Polish zlotys) ($1 = 1.0281 Canadian dollars) (Editing by David Holmes) Link this Share this Digg this Email Reprints

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